The metaverse is reshaping many aspects of society, including how sovereign states think about and manage citizenship. In fact, the whole concept of sovereignty is now coming into question as the virtual frontier expands.
The metaverse and extended reality have brought a new level of digital fluidity into our lives. A digital realm in which augmented reality and virtual reality converge, the metaverse has opened the door to virtual meetings, concerts, gaming, education, art, offices, fitness, healthcare, and almost anything else you can imagine. You can now shop for clothes, tour exotic locations, or host a conference in the virtual world. It is estimated the metaverse could be worth up to USD 5 trillion by 2030.
As its reach grows and more possibilities emerge, the metaverse is also capturing the imagination of several nation states, which are exploring how they can use it to grow their political capital and sovereign equity. One way they are doing so is by offering virtual citizenship. Barbados blazed the trail in this respect, becoming the first nation state to launch a virtual diplomatic embassy in Decentraland, an online world powered by blockchain. Other nations are also now exploring metaverse-based citizenship initiatives.
How does this work? A digital citizen (or e-citizen) is granted some form of virtual or digital identity and legal recognition, but only within virtual or digital worlds. Just as in the real world, e-citizenship comes with certain rights, privileges, and responsibilities. These might include the ability to participate in virtual economies, trade virtual assets, engage with virtual businesses, or vote in the digital world.
In its ‘Digital Citizenship in 2040’ report, KPMG predicts that in the future, digital citizenship could even replace passports and residence cards for the physical world. Virtual nations or cyber communities may gain power, influence, and capital such that they rival real-world nation states. By 2040, it suggests there could be at least 11 virtual nations, each with around 200 million e-citizens and a GDP of above USD 100 billion.
But who are the e-citizens and what is in it for them? They have been dubbed ‘the Metazens’, and include individuals who have already enthusiastically moved many aspects of their lives online. They are willing to pay to carry out activities in the metaverse that they can already do in the real world for free. In exchange, they are confident that the metaverse will open up new economic opportunities for them in the realms of cryptocurrencies, virtual real estate, and non-fungible tokens (NFTs).
As well as providing them with access to new online realms, becoming a virtual citizen could also give many a redefined sense of identity and belonging. “People would be drawn to virtual nations that create great wealth and provide welfare to their citizens in the form of employment, education, and benefits,” according to KPMG report author Vikram Ramankuttyi.
There would be benefits for states themselves as well. Investment migration (a form of legal migration through which high-net-worth individuals can gain residence and citizenship rights in exchange for investing in the host country) facilitates connections in a globalized economy. It also provides nation states with new possibilities through which to raise much-needed capital, such as by offering digital citizenships. What is more, it could also diversify the type of capital they can attract. The metaverse is built on blockchain, so why couldn’t digital assets, cryptocurrencies, and NFTs become accepted forms of investment?
The shift towards e-citizenship could be transformative for investment migration, but would also require some in-depth thinking on thorny issues such as tax — where do you pay it if you are a dual citizen of both virtual and physical nations?
Sovereign states of all sizes are seizing the metaverse as an opportunity to redefine their digital presence and explore new dimensions of sovereignty. Individuals too are welcoming the opportunities it provides.
Emerging nations are leading the way, proving much more upbeat about the potential of the metaverse than developed countries. African nations, notably Nigeria and South Africa, are enthusiastically embracing this new digital realm.
The World Economic Forum (WEF) uncovered polarized opinions between residents of emerging and developed nations in its research into attitudes towards the metaverse. While some viewed the metaverse as synonymous with growth and innovation, others were adopting a more cautious stance. The WEF found that more than two-thirds of people in China, Colombia, India, Peru, and Saudi Arabia felt positive about engaging with extended reality in their daily lives, compared with fewer than a third in Belgium, Canada, France, Germany, Japan, and the UK.
There are already a number of forward-looking digital citizenship initiatives. Several countries offer e-residence programs aimed at digital nomads who want to benefit from a country’s digital infrastructure. For example, in 2022 the Micronesian country Palau was the first sovereign nation in the world to authorize a blockchain-native digital residence offering through which individuals from around the world can open a bank account, start a business, pay 0% income tax, and benefit from a crypto-friendly environment. Azerbaijan, Estonia, Lithuania, and Portugal have also set up digital initiatives, while Brazil, Georgia, and South Africa are reportedly planning similar programs.
Meanwhile, the Pacific island nation of Tuvalu, which has a population of just 12,000, intends to go a step further and establish itself as the world’s first digital nation. It wants to use the power of the metaverse to safeguard its cultural heritage, which is under threat from climate change and rising sea levels, by recording, mapping, and cataloguing its history and landscape.
US thinktank the Wilson Center argues that the metaverse will usher in a whole new era of economic and foreign policy statecraft as countries look to use it to grow their soft power and gain influence on the global stage. It says nations are exploring how best to grow their presence within this digital realm, and that this is likely to pave the way for new investment migration opportunities that transcend physical geographical boundaries, conferring a wide range of benefits on those who take them up.
With innovation in this sphere continuing at a rapid pace, the metaverse could redefine the traditional concepts of residence and citizenship at the point where the virtual and real worlds intersect.